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What Makes Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) A Great Dividend Stock?

Simply Wall St

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Dividend paying stocks like Home Federal Bancorp, Inc. of Louisiana ( NASDAQ:HFBL ) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.

A slim 1.7% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, Home Federal Bancorp of Louisiana could have potential. The company also bought back stock during the year, equivalent to approximately 3.7% of the company's market capitalisation at the time. Some simple research can reduce the risk of buying Home Federal Bancorp of Louisiana for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on Home Federal Bancorp of Louisiana!

NasdaqCM:HFBL Historical Dividend Yield, July 10th 2019

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Home Federal Bancorp of Louisiana paid out 20% of its profit as dividends, over the trailing twelve month period. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.

We update our data on Home Federal Bancorp of Louisiana every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Home Federal Bancorp of Louisiana has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. During the past ten-year period, the first annual payment was US$0.24 in 2009, compared to US$0.56 last year. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time.

Businesses that can grow their dividends at a decent rate and maintain a stable payout can generate substantial wealth for shareholders over the long term.

Dividend Growth Potential

The other half of the dividend investing equation is evaluating whether earnings per share (EPS) are growing. Over the long term, dividends need to grow at or above the rate of inflation, in order to maintain the recipient's purchasing power. It's good to see Home Federal Bancorp of Louisiana has been growing its earnings per share at 15% a year over the past 5 years. Earnings per share are growing at a solid clip, and the payout ratio is low. We think this is an ideal combination in a dividend stock.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Firstly, we like that Home Federal Bancorp of Louisiana has a low and conservative payout ratio. That said, we were glad to see it growing earnings and paying a fairly consistent dividend. Home Federal Bancorp of Louisiana fits all of our criteria, and we think it's an attractive dividend idea that would warrant further investigation.

You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Home Federal Bancorp of Louisiana stock.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com . This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.